Where the Los Angeles housing market stands and where the wildfires can take it

The wildfires in Los Angeles have caused untold damage, misery and loss of life. As of Monday, five large fires have burned nearly 60 square miles in the LA area and 24 people have died.

While the focus right now is on containing the flames and protecting residents, it’s worth looking at where the housing market is in the affected parts of the Los Angeles metropolitan area. Data from Study of Altos indicates an environment with expensive housing, rising inventory and favorable conditions for sellers.

The LA housing market is very stable after the turmoil of the post-pandemic years and the rapid increase in mortgage costs starting in 2022. The current median home price is $1.47 million, down slightly from last year.

While most of the country is suffering from declining property values, LA is up 33% year-over-year, and new pending sales have steadily increased since early 2023. When mortgage rates started to rise, LA was very popular with sellers, but that has changed. more to consumers since then.

Looking at the worst-hit parts of the city, it’s clear that the wildfires have destroyed – or are threatening to destroy – some expensive homes. And looking at them together is important because these markets are interconnected, especially as displaced residents look to find replacement housing.

Areas affected by the Palisades Fire are more expensive than those affected by the Eaton Fire.

Pacific Palisades is subject to the Palisades Fire, and the median home price in the area is $6 million. The average price in Malibu – located on the west coast of the Pacific – is $6.95 million. So far Malibu has not been in the direct path of the fire. Santa Monica is just south of the boundaries of the Palisades Fire, and the median home price there is $3.8 million.

The Eaton fire engulfed Altadena, with an average cost of $3.2 million. If the fire moves south, homes in Pasadena, San Marino and Arcadia will be at risk. Median home prices are $1.9 million, $3.9 million and $3.2 million, respectively.

Like most of the country, the data shows that Los Angeles is a seller’s market, but it varies by location. Altos’ Market Action Index measures the balance between buyers and sellers, with anything above 30 points considered a seller’s market.

Overall, the LA metro area sits at 41.6. But fire-ravaged Altadena had a much higher reading than other areas near the fire at 54.9. Areas near the Palisades Fire had slightly lower index numbers, with Malibu (27.1), Pacific Palisades (31.9) and Santa Monica (33.5) having the lowest readings among the areas analyzed.

Given that the fires are still ongoing and a thorough assessment has not been done of the damaged areas, it will likely be months before we know the extent of the damage. But if reports from cities devastated by hurricanes and other natural disasters are any indication, housing activity in the area is about to come to a complete halt.

Following Hurricane Milton in October, the Tampa metro area saw new listings and new sales plummet. But the market revived when the immediate threat passed. This has resulted in new sales and new listings increasing by 500% or more, suggesting that the market is simply stagnating.

It’s hard to say how things will go in LA after the wildfires are over. Given the extent of the damage, however, it is reasonable to expect that the destruction of homes and the many newly displaced residents will lead to an overall reduction in supply and an increase in the urgent need for housing.

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